DOF defends Marcos decision to limit suspension of fuel taxes
The Department of Finance (DOF) on Tuesday defended President Marcos’ limited suspension of fuel taxes even after being granted broader powers last month to reduce or suspend the excise and value-added tax (VAT) on petroleum products.
Mr. Marcos on Monday announced the suspension of the excise only on liquefied petroleum gas (LPG) and kerosene, and not on diesel and gasoline, as recommended by the interagency Development Budget Coordination Committee (DBCC) on April 7.
The President announced his decision two weeks after he signed Republic Act No. 12316 on March 25, the law granting him authority to reduce or suspend fuel taxes.
In a statement on Tuesday, Finance Secretary Frederick Go said the DBCC had to come up with a “balanced and fiscally responsible approach” to the energy shock triggered by the Iran war.
“The DBCC has determined that suspending excise on diesel and gasoline would not likely provide meaningful relief, as any reduction in retail pump prices would be marginal and largely offset by prevailing market dynamics,” he said.
Household fuel use
Diesel and gasoline had higher excise of P6 and P10 per liter, respectively, compared with P5.65 per liter of kerosene and P3.36 per kilogram of LPG.
Go maintained that the President’s “decision is about protecting Filipino families today while safeguarding fiscal stability for future generations.”
Citing data by the Philippine Statistics Authority (PSA), he said 48 percent of total kerosene consumption came from the bottom 30 percent of households, while 55.7 percent of LPG users were from the bottom 70 percent.
“This means the benefits extend beyond the poorest households to also support middle-income families. For these families, every peso saved on fuel costs means more resources for food, education, and health care,” the finance chief said.
At a press briefing at Malacañang, Finance Undersecretary Karlo Fermin Adriano said suspending the excise on diesel would lead to a revenue loss of about P50 billion, while the suspended taxes on kerosene and LPG constitute a shortfall of P4.1 billion.
“The mandate of the Department of Finance is to collect revenues so we have something to spend on programs,” Adriano said.
“We have P50 billion that will not be given as aid to the vulnerable and middle-income classes. That is why our direction for now is targeted,” he said, adding that the DBCC will conduct a monthly review of its recommendation on the fuel taxes.
Adriano also maintained that “when we remove [the excise on diesel], the ones who will gain the most from this are those who consume diesel the most, which are the wealthiest people.”
He cited data from the Family Income and Expenditure Survey of the PSA, which showed that 85 percent of diesel consumption is in the top-income bracket, although the fuel is also commonly used among public utility vehicles (PUVs).
The DBCC had instead recommended a fuel subsidy for PUVs of P10 per liter of diesel.
Regarding calls to suspend the 12-percent VAT on fuel products, Adriano said the VAT was still needed “to provide subsidies and cash benefits … until the situation normalizes.”
Suspending this tax was not among the DBCC’s recommendations, the DOF official said, adding this would only benefit oil players.
“If we exempt VAT on fuel, most likely companies will just pass on the additional expenses to the consumers by raising prices,” Adriano said.
LPG stockpile
Meanwhile, a leading group of LPG retailers on Tuesday said the stockpile for the fuel mainly used for cooking was still good for 50 days.
The LPG Marketers Association also noted a 30-percent drop in LPG orders compared to March. Fuel prices were raised beginning March 10 after the Iran war broke out on Feb. 28.
But this week diesel prices went down by as much as P20 to P23 per liter, even as global oil prices resumed their surge after peace talks between the United States and Iran announced only last week were aborted over the weekend.
Arnel Ty, the group’s founder, said there was always a drop in orders during the summer season, but acknowledged that consumption further declined amid surging fuel prices.
“Another 15-percent decrease is due to the price increase, as many people in rural areas have shifted to using charcoal and firewood,” Ty also said, adding that this was why the LPG inventory was raised from 35 to 50 days.
He told reporters on Tuesday that LPG retailers were already implementing a P3 price reduction per kilo. He said Malacañang approached industry players two weeks before the President’s announcement on the suspension of the excise on LPG and kerosene.
“One of their demand or instructions to us, if the time comes that the President will announce a suspension, it should be immediately implemented so that the consumer can immediately feel the suspension of the excise tax and that is what we did,” Ty said.
He said the companies had agreed to “absorb” the costs temporarily. “Because we can recoup it when the time comes that the excise tax in the future will be reinstated,” he said. —WITH A REPORT FROM LISBET K. ESMAEL
******
Get real-time news updates: inqnews.net/inqviber
